‘Upbeat mood’ expected at building societies conference

A BUILDING society expert at leading accountancy firm Deloitte believes delegates at the industry’s annual conference, which starts today, will be in a “relatively upbeat mood” despite uncertainties remaining within the sector in 2010.

Steve Williams, head of the building society sector group at Deloitte, said acquistions and mergers within the sector would happen at a “trickle” going forward following a turbulent 2009.

Mr Williams, who is based in Leeds, said it had been difficult for building societies to make money in recent months because of low interest rates.

Margins have been squeezed by low interest rates and competition from UK clearing banks and retailers entering the market, meaning the balance of what building societies pay out in savings and what they earn in mortgage lending has been narrow.

The cost of wholesale funding has also remained high.

Deloitte is set to deliver a report into the building society sector at the two-day Building Societies Association annual conference in Manchester, in which it sets out what it believes needs to be done for further growth to be achieved in the sector.

Mr Williams said steps Deloitte believes building societies should take to grow include focusing on customers’ delivery services in more innovative ways; encouraging public sector bodies to maintain their excess liquidity within the sector; and agreeing an alternative form of core tier one capital with the FSA and HM Treasury to boost capital.

Deloitte is also advising individual building societies to look to share ‘service centres’ with competitors, to identify niche markets, and implement cost reduction measures.

Ahead of the conference, Mr Williams said: “I think it’s been a really tough year for building societies. However, looking forward I think they’ll be more confident about the future.

“There should be a relatively upbeat mood among the industry going forward. However, the sector needs to be able to find other ways to find capital rather than focusing on retained profits.”

Big recent moves across the building societies sector saw Yorkshire Building Society merge with the Chelsea, creating the UK’s second-biggest mutual.